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The first five-year lag Much has been made of the reality that, for the first time in its history, Berkshire Hathaway saw its growth in book value trail the S&P 500 over a five-year period.

As a result, many have questioned if Buffett has finally lost it, and others believe Berkshire Hathaway should be cast aside for different compelling investments. Yet, such a plan would be a terrible idea.

During the true market cycle from 2007 to 2013, Berkshire outperformed the S&P 500, and Buffett noted, "through full cycles in future years, we expect to do that again." Yet, Buffett added a critical distinction about what to truly expect from Berkshire Hathaway.

Charlie Munger, Berkshire's vice chairman and my partner, and I believe both Berkshire's book value and intrinsic value will outperform the S&P in years when the market is down or moderately up.

Source: Company Investor Relations.

But this isn't simply some prideful assertion. There have been 15 years in which the S&P 500 has been down or moderately up in Berkshire Hathaway's existence. And as shown in the chart, Berkshire Hathaway has delivered a resounding victory in those years.

The expectations for 2014With that in mind, it's important to remember that countless people believe 2014 will be a year "when the market is down or moderately up."

FactSet, a research firm, noted in January that market strategists projected the S&P 500 would fall by 2.3% during he next 12 months. Industry analysts weren't quite so bearish, but projected, instead, a 4.8% rise in prices.

Acclaimed investor Seth Klarman -- who manages a hedge fund with $27 billion -- recently said he was "confident that these good times will come to an end," and expected 2014 to be a difficult year.

But simply surveying qualitative expectations and estimations is all too often a terrible idea, and a glance at the quantitative figures reveals an even more staggering reality.

From qualitative to quantitative One of the reasons many people have been concerned about the market itself is the remarkable rise in relative valuation during the last few years. The acclaimed Shiller P/E Ratio -- the stock price divided by its inflation-adjusted earnings during the past 10 years -- from Nobel laureate Robert Shiller, reveals that stocks are indeed becoming increasingly more expensive relative to historical trends:

Source: www.multpl.com

In fact, in the 49 years during which Berkshire Hathaway has existed, there have only been 10 years in which the Shiller P/E Ratio was higher than the 25.3 to begin 2014. And the returns in the one year that followed reveals Berkshire Hathaway's book value growth topped the S&P 500 eight of the years by an average of 6%. Not bad.

Yet, The Motley Fool doesn't believe in simply holding onto a company for a year or two -- and certainly neither does Buffett -- and expanding the time horizon to five years after the Shiller P/E has been this high further highlights Berkshire's success.

Source: Company Investor Relations and author calculations.

As you can see, during the 10 times when the market was valued higher than it currently is, Berkshire Hathaway delivered dramatically better returns during a five-year period. On average, Berkshire Hathaway's grew its book value by an annual return of 9.4% in the preceding five years, whereas the S&P 500 has only returned 2.4%.

But that remarkable outpacing isn't exclusive to just a five-year period. When a 10-year period is considered, the results are even more striking:

Source: Company Investor Relations & Author Calculations.

While the gap is narrowed slightly, Berkshire Hathaway resoundingly beats it, once again. The S&P 500 delivered an average annual return of 3%, and Berkshire saw its book value rise to 9.5%. And although a difference of 6.5% per year may not sound like a lot, the S&P 500, on average, saw a 10-year total return of just 35%, compared to a staggering 150% by Berkshire Hathaway.

The takeaway Attempting to time the market is a remarkably dangerous game, and the numbers shown above shouldn't serve as a deterrent to anyone investing. In the course of a lifetime, placing money every month into the S&P 500 has been a true success story for millions of investors who have been able to retire rich.

However, it's also critical to see Buffett has a resoundingly successful history of outperformance in seasons both good and bad, which is one reason why Berkshire Hathaway presents itself as a compelling investment consideration.

The greatest thing Warren Buffett ever saidAs you likely know, Warren Buffett has made billions through his investing, including his remarkable outperformance of the market. But he's happy to share the countless things he's learned, and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.